Separate units of assessment permit reopening where income was not returned in the correct status.

A return filed in the status of a firm did not amount to a return by an association of persons, because each is a separate unit of assessment. On the facts, the income from the wine business had not been returned in the correct assessable status, so reassessment under section 147(a) was permissible and the earlier assessment did not bar reopening. For the same reason, the notice under section 148 was not invalid on limitation grounds, as no prior return had been filed in the relevant status for the income in question. The reference was thus answered in favour of the Revenue.

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Issues: (i) Whether the Tribunal was right in upholding the reassessment action under section 147(a) of the Income-tax Act, 1961. (ii) Whether the Tribunal was right in refusing to quash the notice under section 148 of the Income-tax Act, 1961 on the ground of limitation.

Issue (i): Whether the Tribunal was right in upholding the reassessment action under section 147(a) of the Income-tax Act, 1961.

Analysis: The income from the wine business had not been returned by the association of persons in its own status, and a return filed in the status of a firm could not substitute a return by the association of persons. The Court treated a firm and an association of persons as separate units of assessment and held that, on the facts, the earlier assessment did not preclude action for reassessment in the proper status.

Conclusion: The reassessment action under section 147(a) was valid and the issue was answered against the assessee.

Issue (ii): Whether the Tribunal was right in refusing to quash the notice under section 148 of the Income-tax Act, 1961 on the ground of limitation.

Analysis: Since no return had been filed earlier by the assessee in the relevant status for the income in question, the Court held that the notice initiating reassessment could not be invalidated on the pleaded ground of limitation. The Court also observed that, in a reference jurisdiction, it answers the legal question referred and does not sit in appeal over the Tribunal's order.

Conclusion: The notice under section 148 was held to be valid and the issue was answered against the assessee.

Final Conclusion: The reference was resolved in favour of the Revenue, sustaining the reassessment proceedings and the notice issued for reopening.

Ratio Decidendi: A return filed in the status of a firm does not amount to a return by an association of persons, and where income in the correct assessable status had not been returned, reassessment and the consequent notice for reopening are permissible in law.

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